Mortgage Preparation Tips

3-in-1 Credit Report

Checking your credit report prior to submitting a home-loan application has two major benefits. First, your credit history determines if you qualify for a mortgage loan. Secondly, your credit score affects the interest rate given on the mortgage loan. There are several ways to acquire a credit report. To quickly view your credit report online, download a free report from Annual Credit Report. You can receive one free report from each of the bureaus annually using this agency. Get your FICO credit rating from MyFico.com. A score in the mid 600s or higher helps you qualify for a low-rate mortgage.

Mortgage lenders will not accept stated income on your mortgage application. Approvals require proof of income or employment. Lenders accept various forms of documentations as evidence that you can afford the home-loan payment. These include paycheck stubs for the past 30 days, tax documents for the past two years, and other sources of income such as alimony or child support. Lenders use this information to determine how much you can afford to spend on a home loan.

Getting a mortgage loan with no money down has become less common, and unless you qualify for a no money down VA home loan, you can anticipate paying a down payment when purchasing your home. Fortunately, the majority of mortgage lenders no longer require huge down payments such as the traditional 20 percent. For example, FHA mortgages requires less than five percent down. Lenders will likely inquire about your down payment source. In other words, do you plan to use money for savings, a gift from family or perhaps sell an existing property and use the proceeds as a down payment on your new home.

Getting rid of debt before buying a home helps you prepare for a mortgage loan. Mortgage payments are huge monthly expenses, and the less debt you hold, the better. Besides, owing an excessive amount of debt reduces your buying power, and mortgage lenders may qualify you for a lesser amount in order to keep your debt ratio low. Paying off large credit card balances is key to reducing your monthly debt payments.